Anatomy of a Slipstream Trade

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–I’m a very sceptical person by nature.

–In relation to the markets I don’t really listen to the constant stream of commentary from all those “experts”. I have grown accustomed over the years to journalists wheeling out the bulls on the days when the market is up and then dragging out the bears when the market goes down. If the media was a human being you would have to conclude that they were suffering from multiple personality disorder and would have them committed.

–There is zero accountability across the whole spectrum of the financial markets; from the brokers to the reporting of news. They will all happily scream their views to all who will listen but there is no one looking back on their past performance and pointing out whether they would actually make money consistently over time. And I assure you that the great bulk of them get it wrong more often than not.

–Everyone is a genius in a bull market. You just have to turn up to the party with a newspaper and some darts and you can call yourself a stock picker. As Uncle Warren Buffett says, it’s when the tide goes out that you find out who’s swimming naked.

–So with my healthy dose of scepticism and expecting that others will be in the same boat as me, I wonder how – or why – people should listen to what I have to say. What would I need to do or say that would separate my point of view from the torrent of gibberish that floods the airwaves?

–My technique for analysing markets is technical, and I know that many people view technical analysis as a form of voodoo. My own view of technicals is that it is a map of human psychology that you use to give you low risk entry points into stocks. It has nothing to do with a crystal ball, or knowing the future, it is using the power of observation to realise that people do the same dumb things over and over again.

–Using this observation you can find entry points into stocks where you only need to risk a very small amount of money to find out if you are wrong. That is pretty much it. No astrology. No looking at tea leaves.

–In my two trading services I stand fully accountable for each and every trade that I send out to subscribers. We can look back on every single recommendation I have made. Not only when I say to get into a trade, but when we first take profit and when we get out.

–I am also not sending out 20 ideas a day and then looking back selectively at the winners and forgetting about the losers like most trading services I have seen. I use a very disciplined and targeted approach to our trading and when there are no opportunities I don’t send out any ideas. We sit on our hands and wait, because there is always a good opportunity around the corner.

–For example our current position has three short trades in three of Australia’s largest companies which we have held since the middle of April (i.e. right near the highs of this bull market) and also we have only one long position in a large gold mining company which is in the money.

–Therefore, while most traders are sweating over every point move in the index hoping it will go back up again, subscribers of Slipstream Trader are making money while the market falls and have done so from the very highs.

–In my other service Swarm Trader – which uses the same trading approach but focuses on small cap companies – we have just had some great news with Centennial coal being taken over.

–Having just entered the stock 6 weeks ago at $3.83 we are now sitting on 52% gains with the price at $5.84 and the overall market is down over this time period.

–Look, even if I blow my own trumpet on current trading performance the scepticism will remain. That’s why I’m including my weekly video report, which I sent out to subscribers on the 23rd June when the ASX 200 was trading near 4500 or 300 points higher than where we are now.

–In it I analyse US and Australian stock markets and predict the sell off that we have seen in the past few weeks. I also look at the Australian dollar, Euro, Oil, copper and gold.

–This video update goes out to subscribers weekly and in it I look at all of the charts of the major markets around the world and analyse the current state of play.

Click on the link to view video: Slipstream Trader Weekly Video report sent on 23rd June 2010.

— The video is 11 minutes long, but is worth viewing if you can elbow out some time today, so you can gain an understanding of my approach in analysing markets.

— I would include the charts of all of the markets covered so that you could see what happened since the video was sent to subscribers but it would take up too much room. If you are interested you could find them here.

–I will include a couple of charts so that you can compare the price action to that predicted:

Australian Dollar Daily Chart

Source: Metastock 06/07/10
Gold Daily Chart

Source: Metastock 06/07/10

–I hope that the video has been of some use to you in perhaps giving you a different perspective of how markets behave.

–The ‘sheeple’ who write for financial news outlets certainly don’t understand how markets behave – and instead feed the greed, hope and fear that causes the markets to move in the way that they do.

— I will continue to trade the markets with as little risk as possible, while also giving subscribers the opportunity to hit a few home runs every now and again.

— Currently, the Swarm Trader service is fully subscribed… but I’m looking for new members of Slipstream Trader. If you’re interested in finding out more about how to make small cap gains from large cap stocks – while keeping your capital risk to a minimum, just click here.

Murray Dawes

Slipstream Trader
for The Daily Reckoning Australia

Murray Dawes
Murray began his career on the Sydney Futures Exchange trading floor in 1993 with Swiss Banking Corporation (SBC). He spent a couple of years in the 3 and 10 year bond and option pits before moving on to the Share Price Index (SPI) futures and options pit. From there he became a broker with SBC specialising in SPI futures and options to institutional clients. After leaving SBC Murray continued his career in broking at Bankers Trust Australia. Then in 2001 Murray moved to Melbourne to work as a hedge fund trader for one of Australia’s wealthiest families. In 2003 he was ready to set up his own firm providing the same proprietary technical trading system to some of Australia’s boutique hedge funds. The success of Murray’s system led to him trading a $10 million account for a high net worth individual. This involved trading Australian and US futures and Australian stocks. Now Murray heads up the technical analysis desk for us passing on to readers some of his experience from 16 years of trading.
Murray Dawes

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